How Does Energy Procurement Work?

Choosing an energy procurement strategy

Is often the single most important decision you ever make while you strive to reduce energy prices. Yes, installing new insulation and updating your existing insulation helps you cut energy consumption, but without a detailed energy procurement strategy your energy reduction will be largely limited to the energy requirements of the house you are living in. In the real world, houses differ in their energy usage patterns because people live in different kinds of houses. This means that if you want to reduce your energy consumption and ultimately your overall energy bill you need to take into account not just the energy needs of the house, but also of the neighborhood.

While many individuals are happy to live in homes with sufficient insulation, for those who are interested in energy procurement strategies in the commercial sectors of the picture is very different. The reason why commercial organizations tend to be more interested in long-term energy efficiency strategies is that they generate a lot of waste heat. The amount of waste heat generated by commercial organizations is in the order of tens of megawatts. For this reason any energy procurement strategy adopted by a commercial organization will be much more comprehensive than that of an individual house.

The energy brokers do not work in a vacuum

They have to work with other suppliers to get access to the markets they serve. Therefore the suppliers they approach will also have an impact on the level of energy procurement strategy adopted by them. It would be in the best interests of these brokers to find suppliers who can meet their needs.

A good supplier can provide both natural gas and electricity at competitive rates. However they are not likely to provide both at the same time. In the case of natural gas energy, the price of gas could fluctuate rapidly, whereas electricity is a commodity whose supply is more fixed. Electricity pricing is a large part of the global energy procurement strategy adopted by businesses today. Most businesses cannot predict future electricity prices. The suppliers therefore take advantage of this fact and offer them competitive prices.

This is a methodology that helps in identifying and evaluating the demand

A good energy procurement strategy therefore ensures that it ensures an ongoing dialogue between the buyer and the supplier. The dialogue is based on three main factors. The first one is informed load forecasting. This is a methodology that helps in identifying and evaluating the demand for a particular product line in the future. This is an uncertain process, as there are no sureties regarding future demand.

The second factor is that the energy procurement strategy should ensure a competitive environment for buyers. It should not only look at existing contracts but also at future ones. A good energy procurement strategy would give the buyers the opportunity to choose between suppliers based on the existing and future contracts. If you are a buyer you should be provided with a wide choice of suppliers in order to select the ones who offer you good prices and reliable services. It should also allow you to negotiate effectively with the suppliers.

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